Dominant players in a number of industries have pursued policies that may once have been effectiv... more Dominant players in a number of industries have pursued policies that may once have been effective, but that now make their markets attractive targets for new entrants. The strategies of new entrants rely on lower overhead costs, new technologies, and alternative distribution channels, and the active targeting of profitable customers. Dominant firms will struggle to respond to the threats, and may find that their existing resources, customers, and contracts lim it their ability to react.
Atlanta Conference on Science and Innovation Policy 2011This production-economics model provides ... more Atlanta Conference on Science and Innovation Policy 2011This production-economics model provides a foundation for a number of science-policy issues about interdisciplinary research. The theory s graphical representation illustrates challenges of interdisciplinary tenure decisions, costs of parochial disciplinarity, incentives for researchers to pursue individual interdisciplinary work vs. forming multidisciplinary teams, and scientific breakthroughs predictably achieved by relaxing disciplinary boundaries.National Science Foundatio
combined model develops the notion that the idiosyncratic preferences of the agent interact with ... more combined model develops the notion that the idiosyncratic preferences of the agent interact with the tasks in the transaction to increase or decrease efficient creation of value within the transaction. Different agents may have different preferences due to (e.g.) idiosyncratic work processes or slightly different skill sets. Our model would predict different efficient governance forms to motivate the different agents. In this way, we take a first step in relating idiosyncratic agents to variation in exchange price, final sale price of the principal's product, and value sharing between the transaction partners. Such a relationship may help to explain the multilevel challenges in strategic human resource research (Coff & Kryscynski, 2011).
Page 1. CREATIVE DESTRUCTION Richard L. Nolan David C. Croson Page 2. Page 3. Page 4. Page 5. Cre... more Page 1. CREATIVE DESTRUCTION Richard L. Nolan David C. Croson Page 2. Page 3. Page 4. Page 5. Creative Destruction This On« KOHJ-FF3-BS61 Page 6. Page 7. Creative Destruction A Six-Stage Process for Transforming ...
Several apparent advantages of vertical integration (i.e., capture of interior margins) disappear... more Several apparent advantages of vertical integration (i.e., capture of interior margins) disappear when carefully compared to the options available to non-integrated firms. The economic rationale for a firm to act as a substitute for the external capital market, in particular, has received serious criticism (Gertner et al. 1994; Billet and Mauer 2003), since independent firms can replicate the capabilities of mutual ownership using contracts except in very specific situations (e.g., asymmetric information, trade secrets, or an irregular funding pattern (Liebeskind 2000)). This paper argues that this view is too simplistic to capture the coordination benefits of vertical integration, particularly in selecting which customers to serve when both manufacturing and financing stages are required to consummate a sale. Previous analyses implicitly assume that coordination between the independent parties has already been accomplished (e.g., through negotiation or the price mechanism) and thus...
Empirical evidence suggests that entrepreneurs make mistakes: too many enter markets and, once th... more Empirical evidence suggests that entrepreneurs make mistakes: too many enter markets and, once there, persist too long. Although scholars have largely settled on behavioral bias as the cause, we suggest that this consensus is premature. These mistakes may also arise from a process in which entrepreneurs continually learn about their prospects and make entry and exit decisions based on what they have learned. We develop a computational model of this process that connects pre- and post-entry learning and can be directed to analyze Bayesian-rational or biased entrepreneurs. The model suggests that, to outside observers, rational entrepreneurs may appear overconfident, seem to take too long to exit, and exhibit a positive correlation between entry cost and persistence in the market. When examining confidence biases, the model suggests that entrepreneurs whose biases cause them to perform the worst after entry will be most likely to enter, that pre-entry learning induces a positive correlation between distinct confidence biases among entrants, and that exit changes the prevalence of certain biases in the surviving population of entrants over time. Our study also speaks to recent work on pre-entry experience that documents the transfer of knowledge from parent to progeny firms, suggesting that, in addition to inheritance, differential performance may also be the result of heterogeneity in the length and quality of pre-entry learning during which an opportunity is assessed.
ABSTRACT Information technology matters to business success because it directly affects the mecha... more ABSTRACT Information technology matters to business success because it directly affects the mechanisms through which they create and capture value to earn a profit: IT is thus integral to a firm's business-level strategy. Much of the extant research on the IT/strategy relationship, however, inaccurately frames IT as only a functional-level strategy. This widespread under-appreciation of the business-level role of IT indicates a need for substantial retheorizing of its role in strategy and its complex and interdependent relationship with the mechanisms through which firms generate profit. Using a comprehensive framework of potential profit mechanisms, we argue that while IT activities remain integral to the functional-level strategies of the firm, they also play several significant roles in business strategy, with substantial performance implications. IT affects industry structure and the set of business-level strategic alternatives and value-creation opportunities that a firm may pursue. Along with complementary organizational changes, IT both enhances the firm's current (ordinary) capabilities and enables new (dynamic) capabilities, including the flexibility to focus on rapidly changing opportunities or to abandon losing initiatives while salvaging substantial asset value. Such digitally attributable capabilities also determine how much of this value, once created, can be captured by the firm--and how much will be dissipated through competition or through the power of value chain partners, the governance of which itself depends on IT. We explore these business-level strategic roles of IT and discuss several provocative implications and future research directions in the converging information systems and strategy domains.
When a company pursues entrepreneurial initiatives targeting innovation, it often faces two strat... more When a company pursues entrepreneurial initiatives targeting innovation, it often faces two strategic questions – what magnitude of entrepreneurial events should it pursue, and with what frequency should these innovations occur? We introduce an analytical framework, based on systems-engineering principles, that guides these twin decisions, allowing companies to benchmark their entrepreneurial initiatives against their industry cohort. The key observable outputs
... Rachel Croson School of Management, University of Texas at Dallas, Richardson, Texas 75080, c... more ... Rachel Croson School of Management, University of Texas at Dallas, Richardson, Texas 75080, crosonr@utdallas.edu Yufei Ren1 Department of Economics, University of Texas at Dallas, Richardson, Texas 75080, yufei.ren@student.utdallas.edu December 2008 Abstract ...
The “mushroom treatment� is a common metaphor for the practice of “keeping emplo... more The “mushroom treatment� is a common metaphor for the practice of “keeping employees in the dark and feeding them a steady diet of bull manure.� We develop a model of this practice of information suppression and misrepresentation within organizations, wherein informed principals have an incentive to deliberately communicate degraded information (clipped “sales leads�) to their subordinates who perform critical tasks
... careless drivers. Love 'ems and kill yous in private health insurance (Clemons and Thatch... more ... careless drivers. Love 'ems and kill yous in private health insurance (Clemons and Thatcher, 1997b): • Love 'ems maintain their health, exercising regularly and avoiding unhealthful ... distance services. But not all patterns are readily explained. Readers of Hot Rod magazine tend ...
Dominant players in a number of industries have pursued policies that may once have been effectiv... more Dominant players in a number of industries have pursued policies that may once have been effective, but that now make their markets attractive targets for new entrants. The strategies of new entrants rely on lower overhead costs, new technologies, and alternative distribution channels, and the active targeting of profitable customers. Dominant firms will struggle to respond to the threats, and may find that their existing resources, customers, and contracts lim it their ability to react.
Atlanta Conference on Science and Innovation Policy 2011This production-economics model provides ... more Atlanta Conference on Science and Innovation Policy 2011This production-economics model provides a foundation for a number of science-policy issues about interdisciplinary research. The theory s graphical representation illustrates challenges of interdisciplinary tenure decisions, costs of parochial disciplinarity, incentives for researchers to pursue individual interdisciplinary work vs. forming multidisciplinary teams, and scientific breakthroughs predictably achieved by relaxing disciplinary boundaries.National Science Foundatio
combined model develops the notion that the idiosyncratic preferences of the agent interact with ... more combined model develops the notion that the idiosyncratic preferences of the agent interact with the tasks in the transaction to increase or decrease efficient creation of value within the transaction. Different agents may have different preferences due to (e.g.) idiosyncratic work processes or slightly different skill sets. Our model would predict different efficient governance forms to motivate the different agents. In this way, we take a first step in relating idiosyncratic agents to variation in exchange price, final sale price of the principal's product, and value sharing between the transaction partners. Such a relationship may help to explain the multilevel challenges in strategic human resource research (Coff & Kryscynski, 2011).
Page 1. CREATIVE DESTRUCTION Richard L. Nolan David C. Croson Page 2. Page 3. Page 4. Page 5. Cre... more Page 1. CREATIVE DESTRUCTION Richard L. Nolan David C. Croson Page 2. Page 3. Page 4. Page 5. Creative Destruction This On« KOHJ-FF3-BS61 Page 6. Page 7. Creative Destruction A Six-Stage Process for Transforming ...
Several apparent advantages of vertical integration (i.e., capture of interior margins) disappear... more Several apparent advantages of vertical integration (i.e., capture of interior margins) disappear when carefully compared to the options available to non-integrated firms. The economic rationale for a firm to act as a substitute for the external capital market, in particular, has received serious criticism (Gertner et al. 1994; Billet and Mauer 2003), since independent firms can replicate the capabilities of mutual ownership using contracts except in very specific situations (e.g., asymmetric information, trade secrets, or an irregular funding pattern (Liebeskind 2000)). This paper argues that this view is too simplistic to capture the coordination benefits of vertical integration, particularly in selecting which customers to serve when both manufacturing and financing stages are required to consummate a sale. Previous analyses implicitly assume that coordination between the independent parties has already been accomplished (e.g., through negotiation or the price mechanism) and thus...
Empirical evidence suggests that entrepreneurs make mistakes: too many enter markets and, once th... more Empirical evidence suggests that entrepreneurs make mistakes: too many enter markets and, once there, persist too long. Although scholars have largely settled on behavioral bias as the cause, we suggest that this consensus is premature. These mistakes may also arise from a process in which entrepreneurs continually learn about their prospects and make entry and exit decisions based on what they have learned. We develop a computational model of this process that connects pre- and post-entry learning and can be directed to analyze Bayesian-rational or biased entrepreneurs. The model suggests that, to outside observers, rational entrepreneurs may appear overconfident, seem to take too long to exit, and exhibit a positive correlation between entry cost and persistence in the market. When examining confidence biases, the model suggests that entrepreneurs whose biases cause them to perform the worst after entry will be most likely to enter, that pre-entry learning induces a positive correlation between distinct confidence biases among entrants, and that exit changes the prevalence of certain biases in the surviving population of entrants over time. Our study also speaks to recent work on pre-entry experience that documents the transfer of knowledge from parent to progeny firms, suggesting that, in addition to inheritance, differential performance may also be the result of heterogeneity in the length and quality of pre-entry learning during which an opportunity is assessed.
ABSTRACT Information technology matters to business success because it directly affects the mecha... more ABSTRACT Information technology matters to business success because it directly affects the mechanisms through which they create and capture value to earn a profit: IT is thus integral to a firm's business-level strategy. Much of the extant research on the IT/strategy relationship, however, inaccurately frames IT as only a functional-level strategy. This widespread under-appreciation of the business-level role of IT indicates a need for substantial retheorizing of its role in strategy and its complex and interdependent relationship with the mechanisms through which firms generate profit. Using a comprehensive framework of potential profit mechanisms, we argue that while IT activities remain integral to the functional-level strategies of the firm, they also play several significant roles in business strategy, with substantial performance implications. IT affects industry structure and the set of business-level strategic alternatives and value-creation opportunities that a firm may pursue. Along with complementary organizational changes, IT both enhances the firm's current (ordinary) capabilities and enables new (dynamic) capabilities, including the flexibility to focus on rapidly changing opportunities or to abandon losing initiatives while salvaging substantial asset value. Such digitally attributable capabilities also determine how much of this value, once created, can be captured by the firm--and how much will be dissipated through competition or through the power of value chain partners, the governance of which itself depends on IT. We explore these business-level strategic roles of IT and discuss several provocative implications and future research directions in the converging information systems and strategy domains.
When a company pursues entrepreneurial initiatives targeting innovation, it often faces two strat... more When a company pursues entrepreneurial initiatives targeting innovation, it often faces two strategic questions – what magnitude of entrepreneurial events should it pursue, and with what frequency should these innovations occur? We introduce an analytical framework, based on systems-engineering principles, that guides these twin decisions, allowing companies to benchmark their entrepreneurial initiatives against their industry cohort. The key observable outputs
... Rachel Croson School of Management, University of Texas at Dallas, Richardson, Texas 75080, c... more ... Rachel Croson School of Management, University of Texas at Dallas, Richardson, Texas 75080, crosonr@utdallas.edu Yufei Ren1 Department of Economics, University of Texas at Dallas, Richardson, Texas 75080, yufei.ren@student.utdallas.edu December 2008 Abstract ...
The “mushroom treatment� is a common metaphor for the practice of “keeping emplo... more The “mushroom treatment� is a common metaphor for the practice of “keeping employees in the dark and feeding them a steady diet of bull manure.� We develop a model of this practice of information suppression and misrepresentation within organizations, wherein informed principals have an incentive to deliberately communicate degraded information (clipped “sales leads�) to their subordinates who perform critical tasks
... careless drivers. Love 'ems and kill yous in private health insurance (Clemons and Thatch... more ... careless drivers. Love 'ems and kill yous in private health insurance (Clemons and Thatcher, 1997b): • Love 'ems maintain their health, exercising regularly and avoiding unhealthful ... distance services. But not all patterns are readily explained. Readers of Hot Rod magazine tend ...
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